By Mike Wackett
Aggressive scrapping, a dearth of newbuilds and port congestion has given the Panamax containership sector a welcome boost and pushed daily charter rates to their highest level in four years. According to Alphaliner, there is currently only one Panamax vessel above 4,000 TEU in lay-up, compared to the 52 idled vessels of a year ago, and although 25 units were scrapped during 2014 a number of other laid-up ships successfully found employment on new routes.
The expanding African trades, where Panamax ships have replaced smaller geared units, and intra-Asia trades have more than taken up the slack in the sector, not least also providing employment for ships that were cascaded out of the transpacific and Middle East trades by the introduction of bigger ships.
Lack of demand for Panamax ships over the past few years and the poor return for owners resulted in a slump in orders for newbuilds in the sector – with only one new ship delivered last year – and so a supply and demand rebalancing has driven charter rates up to around $13,000 per day currently, said the Alphaliner analyst. While the daily hire rate for a 4,000 TEU ship may have doubled over the past year, the market rate is still considerably less than the $27,000 peak rate enjoyed by owners in the early months of 2011.
Meanwhile, the current port congestion crisis afflicting the U.S. west coast is providing a further boost to the sector. Although Panamax ships have mostly given way to 6,000-10,000 TEU units in the transpacific trade, the current delays to mainline vessels have opened up the market for supplementary ad-hoc charters for the transpacific, and for cargo diverted to the U.S. east coast which sails via the Panama Canal.
Spot freight rates from Asia to the U.S. east coast have climbed to over $5,000 per 40ft – more than double the market rate for the U.S. west coast – as shippers seek to overcome the substantial business-threatening delays of containers stuck on ships and congested quays at Los Angeles, Long Beach and Oakland.
The plunge in fuel prices is another factor that has significantly improved the employment prospects for containerships in the smaller sectors over the past six months as lower bunker costs have narrowed the economy of scale gap between ship sizes and made previously uneconomic ships a sustainable option for carriers.
However, Alphaliner noted that there is a dark cloud on the horizon for the Panamax sector in the form of the opening of the expanded Panama Canal scheduled for the latter part of next year. Currently 211 Panamax ships of 4,000 TEUs and above, representing 33 per cent of the sector, are deployed on services transiting the waterway, but from 2016 these vessels could be upgraded to ships of up to 13,000 TEU, as carriers follow the trend of deploying the biggest ships possible on trades.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)